The price of Ethereum (ETH) is struggling to overcome the resistance at $ 1,600 and this is the third attempt of the altcoin since September 2022. Some will say that the rally of 33% years can be interpreted as a failed opportunity to breach the mark of market capitalization of $ 200 billion. .
If the price of Ethereum will exceed $ 1,600, it will return Ether to the top 60 global tradable assets, surpassing giant multinational companies like Nike (NKE), Novartis (NVS), Cisco (CSCO) and Toyota (TM).
Unfortunately, at least for bullish traders, the derivatives market is not signaling that Ether will finally break the $1,600 resistance – at least not until the US Federal Reserve reverses its economic tightening methods.
Bull’s frustration can be partially explained by Silvergate Bank’s $1 billion net loss in the latest quarter. The crypto-friendly bank laid off roughly 40% of its workforce on January 5 and is now facing a class action lawsuit over the FTX and Alameda Research affair. The lawsuit alleges that Silvergate aided and abetted FTX’s fraudulent activities and breached its fiduciary duty.
The flow of negative news continued on January 17, as Japan’s deputy director general of the Financial Services Agency’s Strategy Development and Management Bureau, Mamoru Yanase, stated that the crypto sector should face the same regulation as traditional banks and brokerages.
The fact that Ether continues to trade above $1,500 is positive, but the latest price pump closely follows the 8% gain by the Russell 2000 index. In addition, investors fear that data showing a reduction in inflation is the main driver behind the recovery of the cryptocurrency market, thus retreating in the stock market could trigger another wave of selling.
Consequently, investors believe that Ether could track new gains if the US Federal Reserve continues to raise interest rates. Let’s take a look at the Ether derivative data to find out if the shock pump has a positive impact on investor sentiment.
Ether’s 33% rally is not enough to instill confidence
Retail traders typically avoid quarter futures because of the price difference from the spot market. Meanwhile, professional traders prefer these instruments because they avoid fluctuations in the funding rate in futures contracts.
The two-month futures annual premium should trade between +4% and +8% in a healthy market to cover the associated costs and risks. However, when futures trade at a discount versus the regular spot market, it shows a lack of confidence from the buyer’s influence, which is a bearish indicator.
The chart above shows that derivatives traders remain in “fear mode” as the Ether futures premium is below the 4% threshold. This data shows no strong buyer demand, although it doesn’t signal that traders are anticipating worse price action.
Therefore, traders should analyze the Ether options market to understand whether investors give higher prices to the surprise of adverse price movements.
The options market is neutral, adding strength to the $1.6K resistance
The 25% delta skew is a sign that indicates when market makers and arbitrage tables are overcharging for upside or downside protection.
In a bear market, option investors give a higher probability of a price dump, causing the skew indicator to rise above 10%. On the other hand, bullish markets tend to push the tilt indicator below -10%, which means bearish options are reduced.
The delta skew is excellent since January 14, declining from neutral-to-bearish positive 10% for price neutral options. The move signals that options traders are becoming more comfortable with downside risk as the 60-day delta skew is negative 2%.
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Whales and market makers have not been so optimistic according to the options market, but there is no fear after the encouraging 33% rally. Both the options and the futures market point to pro traders who fear that the $1,600 resistance will continue to have a negative impact on prices.
In essence, more effective measures from the FED are needed before crypto investors flip bullish – either signaling an interest rate hike is imminent, or a change in strategy to curb inflation.
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This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should do their own research when making decisions.